BP has shown best improvement among oil majors - analyst

Following Tuesday’s result, Citi has raised its cash flow forecast, but, reduced its view of earnings per share

BP boasted of “strong delivery and growth” in the fourth quarter of 2017

BP Plc's (LON:BP.) financial results showed that the oil super major is doing better than its peers, that’s the view of Citigroup.

That said, the investment bank has a ‘neutral’ rating for BP with a 510p target price. Following Tuesday’s result, Citi has raised its cash flow forecast, but, reduced its view of earnings per share.

Analyst Alastair Syme, in a note, said: “The key focus of BP FY17 results is that lower Macondo expenses and better business performance has helped generate the strongest YoY improvement in operating cash flow of the global Integrated group.”

Syme noted that BP’s cash returns still have some catching up to do, nonetheless, it is expected to back up with the pack by 2020.

“Soft signals of a rise in dividend in 2018 come as some comfort after what has been 14 quarters unchanged

“The debate, if there is one on BP, is as the business improves to a point of generating post dividend free cash flow, does that money go back to shareholders?”

Strong delivery and growth

BP boasted of “strong delivery and growth” in the fourth quarter of 2017, highlighted by improved upstream production and underlying profit, meanwhile, a further US$1.7bn charge associated with the Gulf of Mexico meant the group reported only a small profit.

There was a total of US$3.32bn of negative non-operating items, leaving the profit attributable to shareholders at US$27mln compared to the US$1.7bn in the preceding three month period.

Underlying profit was reported at US$2.1bn, up from US$1.86bn in the preceding period and from US$400mln in the comparative period of 2016. For the full twelve months, BP made a US$6.1bn underlying profit up from US$2.58bn in the year before.

Operating cashflow amounted to $6.2bn and $24.1bn for the fourth quarter and the full year respectively.

BP said upstream production increased 12% helped by the delivery of seven new projects. Output tallied 3.6mln barrels oil equivalent per day, including contributions for the company’s stake in Rosneft. It marked the best year for production since 2010. It discovered some 1bn barrels worth of new discoveries as the exploration division saw successes.

One of the strongest years in BP's recent history

"2017 was one of the strongest years in BP's recent history,” said chief executive Bob Dudley.

“We delivered operationally and financially, with very strong earnings in the Downstream, Upstream production up 12%, and our finances rebalanced. And we did all this while maintaining safe and reliable operations.

"We enter the second year of our five-year plan with real momentum, increasingly confident that we can continue to deliver growth across our business, improving cash flows and returns for shareholders out to 2021 and beyond.”

The oil major maintained its quarterly dividend, at 10 cents per share, and confirmed that it spent US$343mln on share buybacks which it said offset all the dilution created by the third quarter’s scrip dividends.

The company has exploration and development upside with its suite of North African oil assets

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BP is one of the world's largest oil and gas companies with operations in more than 100 countries across six continents. The company's main businesses are exploration and production of oil and gas; refining, manufacturing and marketing of oil products and...

BP is one of the world's largest oil and gas companies with operations in more than 100 countries across six continents. The company's main businesses are exploration and production of oil and gas; refining, manufacturing and marketing of oil products and petrochemicals; transportation and marketing of natural gas; and BP Alternative Energy, a growing business in renewable and low-carbon power and next generation energy technologies.

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